Yikes, been away for a while and saddened to hear that the writing is on the wall for CCU. It's unlikely that shaeholders will get anything back - first they have to find a buyer for the mine. Maybe they get 20 mill for it - the bank gets theirs, then probably Magna will get their bit and then the creditors will get their piece. Maybe the buyer will agree to pay out CCU's creditors as part of the deal.
If you believe in the project, save that cash you were hoping to put into the placement and wait and see if the new buyer floats the business through an IPO. My thinking is that someone will pick up the development for a song, put it on Care and Maint and then wait for the silver price to improve before floating it again.
Debt sunk the company, and in the future I will be exiting any company that takes it on, unless it already has a viable source of income and is just looking for a way to expand the business.
They could have gone to the market and raised all the cash they needed when the silver price was going well. There would have be dilution but at least the sword of debt and repayments wouldn't have been hanging over their head.
Lessons for me:
1. When you're on a big win, don't be afraid to exit (You've still won) 2. Avoid companies that take on debt with no revenue stream just to avoid dilution to the shareholders (board members with shareholdings are acting in their own interest, even if they package it up as being your best mate) 3. Sell when JPM are buying (poisoned chalice) 4. Don't chase your losses.
CCU Price at posting:
5.8¢ Sentiment: None Disclosure: Not Held
